UPDATE: Treasury yields jump as details of tax plan emerge
By Mark DeCambre, MarketWatch , Sunny Oh
10- and 30-year Treasury yields are up more than 6 basis points
U.S. Treasury prices retreated further on Wednesday, driving yields higher, after the White House unveiled further details of its plan to overhaul the tax code, reviving the so-called reflation trade that was underpinned by hopes that President Donald Trump's fiscal agenda would stoke inflation pressures.
Investors also sold their holdings of government paper after Federal Reserve Chairwoman Janet Yellen on Tuesday outlined the Fed's reasoning for an additional rate increase this year. Fed funds futures traders are pricing in a more than 80% chance of another rate increase in 2017, compared with about 38% a month ago. according to CME Group data (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).
What are bond yields doing?
The benchmark 10-year Treasury yield rose 5.9 basis point to 2.288%, compared with 2.229% late Tuesday in New York (http://www.marketwatch.com/story/treasury-yields-stabilize-as-traders-brace-for-data-fed-speakers-2017-09-26). The 2-year Treasury note yield, which is more sensitive to shifts in rate expectations, climbed 3.8 basis points to 1.478%. The 30-year bond yield added 7.2 basis points to 2.813%. Yields and bond prices move in opposite directions.
In Europe, the German 10-year government bond took a cue from the U.S., rising more than 6 basis points to hit 0.464%. Part of the move was driven by reports that German Finance minister Wolfgang Schäuble would leave his position (http://www.marketwatch.com/story/german-finance-minister-to-become-parliamentary-president-2017-09-27) to become the next president of the country's parliamentary body. He has been a critic of the European Central Bank's loose monetary policy.
What does the data say (http://www.marketwatch.com/economy-politics/calendars/economic)?
August durable-goods orders jumped 1.7% (http://www.marketwatch.com/story/durable-goods-orders-jump-17-in-august-2017-09-27), topping the average forecast ofeconomists surveyed by MarketWatch for a rise of 1%.
Pending home sales for August fell 2.6% to 106.3 (http://www.marketwatch.com/story/home-contract-signings-tumble-to-near-2-year-low-hit-by-hurricanes-and-tight-supply-2017-09-27), the lowest reading since January 2016. Expectations were for a decline of 0.8%.
What else is the market anticipating?
President Donald Trump and Republican leaders are proposing a cut in the top corporate tax rate (http://www.marketwatch.com/story/trump-republicans-to-propose-scrapping-state-and-local-deduction-in-tax-overhaul-2017-09-27)to 20% from its current 35%, repealing the estate tax and eliminating state and local tax deduction as part of a sweeping overhaul of the U.S. tax code.
What are other assets doing?
U.S. stock benchmarks are mixed, with the Dow Jones Industrial Average on track to extend (http://www.marketwatch.com/story/us-stocks-set-to-open-higher-but-nike-nosedives-after-earnings-2017-09-27)a four-session skid, while gold futures, perceived as a haven asset saw a firm drop below $1,300 an ounce.
Which Fed speakers are on deck?
-Mark DeCambre; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires